That would only work if ALL users decided to move to SCbtc and no user wanted to buy BTC under any circumstances, even with spreads in the thousands of dollars or more. If the tech were that far superior then SCbtc deserves to win out. In reality, there will most likely be debate over which system is better and not all users will convert, resulting in normal arbitration.

People would certainly buy BTC if scBTC were worth more, but only at something less than the scBTC value in order to convert it and make a profit. There would be no reason to convert back

Yes there is reason to convert back. You sell the scBTC at a profit and take the profit and buy more BTC to convert. Rinse and repeat.

No that doesn't work once all the BTC are converted. The only ones you could possibly find to buy for conversion would be newly mined coins, and miners would have no reason to sell them to you. They can just convert themselves (which is what they would do).

The arbitrage you is exactly what would happen, but it would quickly convert all the BTC until there were none left, then the main chain would simply die (other than for mining purposes).

That would only work if ALL users decided to move to SCbtc and no user wanted to buy BTC under any circumstances, even with spreads in the thousands of dollars or more. If the tech were that far superior then SCbtc deserves to win out. In reality, there will most likely be debate over which system is better and not all users will convert, resulting in normal arbitration.

People would certainly buy BTC if scBTC were worth more, but only at something less than the scBTC value in order to convert it and make a profit. There would be no reason to convert back

Yes there is reason to convert back. You sell the scBTC at a profit and take the profit and buy more BTC to convert. Rinse and repeat.

No that doesn't work once all the BTC are converted. The only ones you could possibly find to buy for conversion would be newly mined coins, and miners would have no reason to sell them to you. They can just convert themselves (which is what they would do).

The arbitrage you is exactly what would happen, but it would quickly convert all the BTC until there were none left, then the main chain would simply die (other than for mining purposes).

That is a bold assumption, pun intended. If I had a satoshi for every time someone said the price of bitcoin could go to 0, then I would be rich... as I said before, if the technology of SCbtc is that great, then it deserves to win.

Counterfeit: made in imitation of something else with intent to deceive: merriam-webster

Say a microtransactions sidechain is developed with a fixed supply of one-billion Micros, and an exchange rate of 1 BTC = 1 million Micros. That means that 1000BTC *total* will ever be able to move to the sidechain. Say the sidechain is very successful; ie, Micros work really well and start to gain a lot of real-world economic traction and value. So the 1000BTC gets transferred over.

Now say that Micros continue to see more use. Their purchasing power goes up, but this has no effect whatsoever on the purchasing power of bitcoin because the max has already moved in. Now all we have is another alt that *used to* have an easy decentralized way of buying it with bitcoin.

Arbitrage. For example: All 1000 bitcoin are transferred and micros increase in value to the point that:

1 million micros = $8001 bitcoin = $400

Anyone wanting to arb this spread can sell 1 million micros for $800, buy 1 bitcoin for $400, pocket $400, convert that 1 bitcoin to 1 million micros, rinse and repeat. Most likely, one billion micros will never be in circulation at any point in time because of arbitrage.

What if the exchange function specified that after time/block N, the exchange rate is 1 BTC = 0 Micros ? No more arb.

Not to be pedantic, but the point is that the exchange rate can be defined by "any deterministic function". Seems to me that there are probably many classes of deterministic functions which could prevent value from moving back to bitcoin.

Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.

Sidechains seem to have no downsides for Bitcoin that I can see, and solve a bunch of really thorny problems. As long as they are defensible it should have huge value for a greatly expanded Bitcoin userbase. Probably for us BTC hodlers as well in monetary terms as well as for more philosophical aspects. Some sidechains could be totally 'licensed' to the government's satisfaction so all of the big names could jump on board.

My guess is that there will be some who try desperately to yank out Satoshi's 1MB cap ASAP before it's to late. As long as the cap is in place the system will be much more difficult to subvert or monopolize and that has been driving some clued in people crazy for as long as I've been watching things.

tvbcof, can you take the tinfoil hat off now?

Sidechains may work brilliantly, and deliver lots of 2.0 applications, but this tech will not appear overnight. What is the point of star-ship Enterprise quality sidechains working off the MySpace of cryptocurrency?

Say a microtransactions sidechain is developed with a fixed supply of one-billion Micros, and an exchange rate of 1 BTC = 1 million Micros. That means that 1000BTC *total* will ever be able to move to the sidechain. Say the sidechain is very successful; ie, Micros work really well and start to gain a lot of real-world economic traction and value. So the 1000BTC gets transferred over.

Now say that Micros continue to see more use. Their purchasing power goes up, but this has no effect whatsoever on the purchasing power of bitcoin because the max has already moved in. Now all we have is another alt that *used to* have an easy decentralized way of buying it with bitcoin.

Arbitrage. For example: All 1000 bitcoin are transferred and micros increase in value to the point that:

1 million micros = $8001 bitcoin = $400

Anyone wanting to arb this spread can sell 1 million micros for $800, buy 1 bitcoin for $400, pocket $400, convert that 1 bitcoin to 1 million micros, rinse and repeat. Most likely, one billion micros will never be in circulation at any point in time because of arbitrage.

What if the exchange function specified that after time/block N, the exchange rate is 1 BTC = 0 Micros ? No more arb.

Not to be pedantic, but the point is that the exchange rate can be defined by "any deterministic function". Seems to me that there are probably many classes of deterministic functions which could prevent value from moving back to bitcoin.

Then I suppose bitcoin would be lost, only affecting users of the side chain. Arb could still be done with micros that hadn't matured. As long as the exchange rate is deterministic and not stochastic.

Counterfeit: made in imitation of something else with intent to deceive: merriam-webster

...What if the exchange function specified that after time/block N, the exchange rate is 1 BTC = 0 Micros ? No more arb.

Not to be pedantic, but the point is that the exchange rate can be defined by "any deterministic function". Seems to me that there are probably many classes of deterministic functions which could prevent value from moving back to bitcoin.

Then I suppose bitcoin would be lost, only affecting users of the side chain. Arb could still be done with micros that hadn't matured. As long as the exchange rate is deterministic and not stochastic.

Not sure I follow. If there's no way to move bitcoin to the sidechain, the arb channel is closed, and bitcoin cannot benefit from increased purchasing power of the sidecoin. This is only relevant after all the sidecoins have been created/unlocked/whatever. Is that what you mean by "matured"?

Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.

...What if the exchange function specified that after time/block N, the exchange rate is 1 BTC = 0 Micros ? No more arb.

Not to be pedantic, but the point is that the exchange rate can be defined by "any deterministic function". Seems to me that there are probably many classes of deterministic functions which could prevent value from moving back to bitcoin.

Then I suppose bitcoin would be lost, only affecting users of the side chain. Arb could still be done with micros that hadn't matured. As long as the exchange rate is deterministic and not stochastic.

Not sure I follow. If there's no way to move bitcoin to the sidechain, the arb channel is closed, and bitcoin cannot benefit from increased purchasing power of the sidecoin. This is only relevant after all the sidecoins have been created/unlocked/whatever. Is that what you mean by "matured"?

Maybe I should have said expire. So you are saying the exchange rate can cease to exist after a certain time/block N for the entire side chain? Or, once you convert a coin, that coin cannot be exchanged back after a certain time/block N?

Counterfeit: made in imitation of something else with intent to deceive: merriam-webster

Not raising blocksize, *at least* roughly allowing for Moore's Law, seems insane, and would just drive some alt to gain significant marketshare.

Absolutely.

No matter how good SC are, they are not a substitute for allowing the existing system to scale at the rate of the slowest improving computing technology: bandwidth.

Bandwidth may or may not be the slowest improving computing technology, but it's certainly the weak link in any networked system.

It's hard enough to understand how people could fantasize about Bitcoin becoming the new gold and vanquishing the USD and all that crap. It's much much much more difficult to understand how one could envision this with everything going on in today's hunky-dory fasion with 'Moores law' yielding joy and solutions to all the unwashed masses problems.

So-called 'bandwidth'* will never be brought to zero, but it could quite trivially be brought to a very low value under the right set of circumstances. And there are a number of sets which would qualify. I don't (currently) fear that my BTC would vanish in such instances, but they could become vastly less useful and convenient for a fair bit of time. As long as Bitcoin does not actually need protective hardening against robust attacks (as is the case today) then it is mostly a toy (as is the case today.)

(*) latency is at least as big of a potential threat.

Quote

Never underestimate the bandwidth of a station wagon full of tapes hurtling down the highway.

...What if the exchange function specified that after time/block N, the exchange rate is 1 BTC = 0 Micros ? No more arb.

Not to be pedantic, but the point is that the exchange rate can be defined by "any deterministic function". Seems to me that there are probably many classes of deterministic functions which could prevent value from moving back to bitcoin.

Then I suppose bitcoin would be lost, only affecting users of the side chain. Arb could still be done with micros that hadn't matured. As long as the exchange rate is deterministic and not stochastic.

Not sure I follow. If there's no way to move bitcoin to the sidechain, the arb channel is closed, and bitcoin cannot benefit from increased purchasing power of the sidecoin. This is only relevant after all the sidecoins have been created/unlocked/whatever. Is that what you mean by "matured"?

Maybe I should have said expire. So you are saying the exchange rate can cease to exist after a certain time/block N for the entire side chain? Or, once you convert a coin, that coin cannot be exchanged back after a certain time/block N?

The former: After time N for the whole chain, global exchange rate goes to 1 BTC = 0 Sidecoin. I see nothing preventing the exchange rate function from being able to be specified this way.

Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.

...What if the exchange function specified that after time/block N, the exchange rate is 1 BTC = 0 Micros ? No more arb.

Not to be pedantic, but the point is that the exchange rate can be defined by "any deterministic function". Seems to me that there are probably many classes of deterministic functions which could prevent value from moving back to bitcoin.

Then I suppose bitcoin would be lost, only affecting users of the side chain. Arb could still be done with micros that hadn't matured. As long as the exchange rate is deterministic and not stochastic.

Not sure I follow. If there's no way to move bitcoin to the sidechain, the arb channel is closed, and bitcoin cannot benefit from increased purchasing power of the sidecoin. This is only relevant after all the sidecoins have been created/unlocked/whatever. Is that what you mean by "matured"?

Maybe I should have said expire. So you are saying the exchange rate can cease to exist after a certain time/block N for the entire side chain? Or, once you convert a coin, that coin cannot be exchanged back after a certain time/block N?

The former: After time N for the whole chain, global exchange rate goes to 1 BTC = 0 Sidecoin. I see nothing preventing the exchange rate function from being able to be specified this way.

Then the sidechain would effectively become a separate chain... an altcoin. I guess this is a question for the devs.

Counterfeit: made in imitation of something else with intent to deceive: merriam-webster

...What if the exchange function specified that after time/block N, the exchange rate is 1 BTC = 0 Micros ? No more arb.

Not to be pedantic, but the point is that the exchange rate can be defined by "any deterministic function". Seems to me that there are probably many classes of deterministic functions which could prevent value from moving back to bitcoin.

Then I suppose bitcoin would be lost, only affecting users of the side chain. Arb could still be done with micros that hadn't matured. As long as the exchange rate is deterministic and not stochastic.

Not sure I follow. If there's no way to move bitcoin to the sidechain, the arb channel is closed, and bitcoin cannot benefit from increased purchasing power of the sidecoin. This is only relevant after all the sidecoins have been created/unlocked/whatever. Is that what you mean by "matured"?

Maybe I should have said expire. So you are saying the exchange rate can cease to exist after a certain time/block N for the entire side chain? Or, once you convert a coin, that coin cannot be exchanged back after a certain time/block N?

The former: After time N for the whole chain, global exchange rate goes to 1 BTC = 0 Sidecoin. I see nothing preventing the exchange rate function from being able to be specified this way.

Then the sidechain would effectively become a separate chain... an altcoin. I guess this is a question for the devs.

Of course not. They can force a two-way peg through regulation. /s

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.

Ethernet just celebrated its 40th birthday and its history is arguably a better analog for bitcoin and the alts than say myspace versus facebook. It was up against Big Blue's token ring and IBM was the Fed of the computer industry at the time. IBM even commissioned professors to write papers suggesting that ethernet wasn't feasible for commercial use, but happily ethernet eventually won over and it marked the first major kick in the nuts for IBM's influence and hegemony (Microsoft and Compaq later took out further chunks). Ethernet was also a decentralized architecture and beyond interacting with the layers below and above it, it didn't care much about anything. It just provided a solid and pervasive framework. Open source didn't really exist back then and ethernet was licensed but it was much cheaper than token ring. The major reason ethernet prevailed was because it was up against only IBM and there wasn't much else in the way of noise. In a way, I think Bitcoin could have benefitted from a more restrictive licensing agreement, whilst still remaining open source. Sidechain developments may indeed be complementary but the alts are mostly an expensive and divisive distraction imo, even though there are some very promising ideas.

This is open source software. Even considering stealth development of a rogue sidechain, the moment they commit the code to a sidechain, the code is out there for everyone to see.

the SC doesn't have to be rogue. it just has to be better.

once it's determined the SC is better, the scBTC become more valuable than BTC. the arb can't work b/c the SC chain is superior and therefore the scBTC are worth more than the BTC. those who moved first will be in a better position. once other BTC holders detect this, they will start to migrate to scBTC. but the catch is: there's a cost to do so. mining fees.

once miners detect this migration they will raise their fees to extortionist levels. they have to b/c accepting a devaluing BTC is risky.

the reason this is more dangerous than simple altcoins is that you're building a system where there is a temptation for miners to merge mine these SC's thus providing them with the security they need to get up and running. we know from Peter Todd that Hill has been aggressively attempting to get mining pools to support SC's.

A better scBTC code will be open for everyone to review the moment it is commited to a SC

Quote

Pieter Wuille, bitcoin core developerWhat we hope to accomplish is allow more innovation in the Bitcoin ecosystem, without needing a different currency.

If anyone premines (or otherwise inflates, even after the creation) coins on a sidechain, it would need to be encoded in the sidechain's rules. It seems unlikely people would move their assets to such a sidechain, and likely that even if there were benefits to using that sidechain, someone would simply fork it to remove the undesirable inflation.So it seems rather pointless to even implement - we certainly aren't planning to.

Assuming someone does come up with a scBTC that is so evidently superior it could precipitate a mass exodus off the parent BTC chain they will most certainly end up creating an actual altcoin using their chain as the parent chain.

This is because this new chain can only achieve Bitcoin's chain security if all nodes and hashing power switch over. A sidechain is inherently less secure than the parent, BTC blockchain.

To entertain your scenario the network then would be left with two options to consider. Remember Good Money drives out Bad Money :

1) The hypothetic Blockstream "pre-mined" altcoin2) The community fork of the exact same altcoin with fairer distribution (hint : 1:1 peg)

Remember that a Bitcoin-like first mover advantage is inexistent in that case because of the open source development.

Merge mining is a perfectly normal process and it can be extremely beneficial. Providing (almost) the same network security of BTC to altchains is a valuable and noteworthy contribution to their own development. What you seem to forget is that does not benefit them with the same network effect.

Name me one altcoin that people would undoubtedly switch over to if it profited from Bitcoin's network security?

I have spent some time reading the Reddit AMA and I'm sorry to say but it was disappointing to witness the childish stubbordness in your numerous comment in the face of considerably knowledgeable adversity. Your back must be aching from all this heavy lifting cause there were some serious moving of the goal post. You were corrected many time for different false assumption that you keep spreading around on this forum which I consider very concerning misinformation.

The Blockstream team has made it CLEAR they have NO interest into alternative currencies built on a sidechain. This is absolutely not their vision of sidechain and it is explained repeatedly in the white paper.

Quote

Adam Backsidechains are a generic extension mechanism. we hope many people make use of the sidechain extension mechanism to add innovative new features centered around the bitcoin currency.

"I believe this will be the ultimate fate of Bitcoin, to be the "high-powered money" that serves as a reserve currency for banks that issue their own digital cash." Hal Finney, Dec. 2010

It was up against Big Blue's token ring and IBM was the Fed of the computer industry at the time. IBM even commissioned professors to write papers suggesting that ethernet wasn't feasible for commercial use, but happily ethernet eventually won over and it marked the first major kick in the nuts for IBM's influence and hegemony (Microsoft and Compaq later took out further chunks). Ethernet was also a decentralized architecture and beyond interacting with the layers below and above it, it didn't care much about anything. It just provided a solid and pervasive framework. Open source didn't really exist back then and ethernet was licensed but it was much cheaper than token ring. The major reason ethernet prevailed was because it was up against only IBM and there wasn't much else in the way of noise. In a way, I think Bitcoin could have benefitted from a more restrictive licensing agreement, whilst still remaining open source. Sidechain developments may indeed be complementary but the alts are mostly an expensive and divisive distraction imo, even though there are some very promising ideas.

Ah, Token-ring. My first summer jobs as a teenager involved ripping that out of many walls and ceilings and installing Cat-3 ethernet cable instead.

Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.

That would only work if ALL users decided to move to SCbtc and no user wanted to buy BTC under any circumstances, even with spreads in the thousands of dollars or more. If the tech were that far superior then SCbtc deserves to win out. In reality, there will most likely be debate over which system is better and not all users will convert, resulting in normal arbitration.

People would certainly buy BTC if scBTC were worth more, but only at something less than the scBTC value in order to convert it and make a profit. There would be no reason to convert back

Yes there is reason to convert back. You sell the scBTC at a profit and take the profit and buy more BTC to convert. Rinse and repeat.

No that doesn't work once all the BTC are converted. The only ones you could possibly find to buy for conversion would be newly mined coins, and miners would have no reason to sell them to you. They can just convert themselves (which is what they would do).

The arbitrage you is exactly what would happen, but it would quickly convert all the BTC until there were none left, then the main chain would simply die (other than for mining purposes).

That is a bold assumption, pun intended. If I had a satoshi for every time someone said the price of bitcoin could go to 0, then I would be rich... as I said before, if the technology of SCbtc is that great, then it deserves to win.

I never said the price goes to zoro. The price would be approximately the same as scBTC, obviously, since you can convert. There would just be no reason to hold BTC. If scBTC offers some advantage to enough people, you might as well convert it.

Your source says "10% less than Moore's law." That's not really much difference. Still a lot and still exponential, for now.

Yeah, indeed. Gavin quoted Nielson's as 50%/yr in his scalability roadmap post. Works out to pretty close to Moore's doubling every 18months. I think the error surrounding the assumptions these "laws" fundamentally make likely dwarfs whatever difference there is between Moore and Nielson growth rates anyways.

Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.